I mean, hell the worlds economies are huge, won't it take decades to bring it all down? What sort of austerity measures could the US government attempt in an economic collapse as described by many"peak Oil" hysterics?

hoplite wrote:I mean, hell the worlds economies are huge, won't it take decades to bring it all down? What sort of austerity measures could the US government attempt in an economic collapse as described by many"peak Oil" hysterics?

Well, start off with rationing of gasoline; so, people with a long commute and low mileage vehicles have a problem.

If fuel is more expensive, then the cost to grow and transport food will go up. So, do we increase taxes to subsidize the farmers and the truckers, or do we pass the costs through to the consumer? What of those who cannot afford such increases in prices?

Shall we support the airline industry? Through subsidies, perhaps? But there go the taxes again.

And what of tourism? Many cities derive substantial revenues from tourism. The hotel industry depends on it. How do we keep it alive, along with all the related jobs, if people can't travel much?

Now, while all this is going on, people have to spend more on fuel, right? So they spend less on other stuff. Which puts those businesses into trouble....

And the real challenge is that things wouldn't really stabilize. The supply of energy would keep going down, and the situation more difficult.

Suppose that you got a 10% pay cut. You'd get by. Next year, you get another 10% pay cut. Things get tougher. You keep trimming expenses, but it doesn't really help because next year you get even less!

Interestingly enough, some of the old nuclear war planning assumed we'd regress back to the sixties; which matches rather well with the sort of reductions in oil consumption we need to stretch out the supply.

Interestingly enough, some of the old nuclear war planning assumed we'd regress back to the sixties; which matches rather well with the sort of reductions in oil consumption we need to stretch out the supply.

How would we even manage to regress back to 1960 technology wise if there was a full scale thermonuclear war? All major cities, (along with several smaller ones), quite a bit of cropland surrounding the missile complexes in the mid-west, forests, military infrastructure, and utility infrastructure would be damaged beyond repair. This is only taking into effect the initial detonation. What about the fires that would surely take place in forests and croplands targeted by the ICBMs? Then you have the problem of radiation, and the EMP effect on electronics that have not been physically destroyed. If WW III does happen, I only hope to be dead, and not live in a world completely ravaged by the power of fusion.

Does anyone else have a hard time actually imagining a crash? Rationally, I know that at some point in the not-too-distant future it's probably going to happen, and so eventually we will be in the month before the 'crash', the week, the day etc, until eventually you can say 'it's started'. I guess I'll just believe it when I see it

Chocky, my feelings exactly. It's Kafkasian to think about 'crash'. It seems like a thought that has no place on this world, makes you somehow feel like an alien among your own friends and family. Weird, no?

By the way, I loved that childrens series with Chocky. What was it called again? 'Chocky' right? Pity I missed some of the instalments.

I spent most of the 90s thinking that the stock market was crazily overvalued. I recall mostly when I worked at the stock exchange in 1995. We were all just shocked at the daily new highs that kept happening. It was another 5 years before the Dow hit 12,000 and actually peaked.

Just because you think something is too high does not mean a crash is happening near term. These things have a way of just getting completely insane. Just look at the housing market. I have been hearing about the overvalued housing market for the past 5 years. Still no nationwide crash.

Last edited by DriveElectric on Sun 13 Mar 2005, 09:12:08, edited 1 time in total.

Okay - so America's economy is not sustainable. America is taking in more and more debt at ever increasing rates... This model can't continue for ever. The questions are when will the change occur and when it does occur what will happen.

It's hard to imagine since I imagine that no one on this board has 1st hand experience of it... Anyone witness the recent Argentina crash? The 1929 crash? Aren't there also lots of safeguards in the stock market these days preventing massive crashes? The vast majority of people can quite happily ignore business and market news - when will that kind of news effect the mad on the street? How will the man on the street be effected by a dollar or market crash?

"Everything is proceeding as I have foreseen." The Emperor (Return of the Jedi)
The Oil Drum: Europe

clv101 wrote:Aren't there also lots of safeguards in the stock market these days preventing massive crashes? The vast majority of people can quite happily ignore business and market news - when will that kind of news effect the mad on the street? How will the man on the street be effected by a dollar or market crash?

The dollar has already crashed. Did you miss it? The dollar has declined 58% vs the Euro in the past 4 years. In most markets, that is a crash. I suspect the selloff is not done yet. But at some point there is a mechanism that starts hurting the Euro, Yen, etc. If the US economy no longer is expanding, then the rest of the world is also entering a recession. Asian and European economies have nobody to export to and they enter a decline. That hurts their currency value also.

The Federal reserve raising interest rates makes the dollar more attractive to those seeking higher yields. That supports the dollar. If peak oil leads to inflation, that would force the fed to raise rates, thus helping the dollar.

Stating point blank "Dollar will crash" is far too simplistic and likely wrong. There are just as many issues facing Europe and Japan that could hurt their currencies as much as the dollar.

Does anyone else have a hard time actually imagining a crash? Rationally, I know that at some point in the not-too-distant future it's probably going to happen, and so eventually we will be in the month before the 'crash', the week, the day etc, until eventually you can say 'it's started'. I guess I'll just believe it when I see it --Sys1

A writer by the name of George Monbiot might give a good response to this:

We live in a dream world. With a small, rational part of the brain, we recognize that our existence is governed by material realities, and that, as those realities change, so will our lives. But underlying this awareness is the deep semi-consciousness that absorbs the moment in which we live, then generalizes it, projecting our future lives as repeated instances of the present. This, not the superficial world of our reason, is our true reality

It makes sense, and explains a lot about human behavior. The mind has a hard time believing--not just accepting, actually believing--that things in the future could be radically different than they are now. Humans seem to take for granted, on the semi-conscious level Monbiot mentions, that no real cataclysm or upheaval could drastically alter our existence.

The dollar has already crashed. Did you miss it? The dollar has declined 58% vs the Euro in the past 4 years. In most markets, that is a crash. I suspect the selloff is not done yet. But at some point there is a mechanism that starts hurting the Euro, Yen, etc. If the US economy no longer is expanding, then the rest of the world is also entering a recession. Asian and European economies have nobody to export to and they enter a decline. That hurts their currency value also.

The Federal reserve raising interest rates makes the dollar more attractive to those seeking higher yields. That supports the dollar. If peak oil leads to inflation, that would force the fed to raise rates, thus helping the dollar.

Stating point blank "Dollar will crash" is far too simplistic and likely wrong. There are just as many issues facing Europe and Japan that could hurt their currencies as much as the dollar.

True statement. The $ really has tanked and anyone who hasnt sold the $ after 9.11 was desirous of losing money. However I think that you shoyld consider a few points a recession in Europe and Japan may not hurt their currency if there is a contraction of the money supply although they have a worse S.S security problem. It seems that europeans and japaneese are not so eager to go into debt even at these rates. Also the currency market is mainly driven by trade and budget deficit numbers and they can only grow with the depreciation of the $. This is mainly result of the so called "critcal imports" without which there is no economy like oil or NG also most of the US manifacturing base has been ousorced to China if you dont produce the stuff anymore noone can buy it from you can he and you must import it at higher price. The only way to help the trade deficit will be to export some of those lawyers, interiour designers, wedding consultants not likely to happen. If you have paid attention to the job numbers (which we all know are cooked as enron's books or Saudi arabia oil reserve numbers) most of the growth is in the non-productive service sector and this can only make the deficit worse. Cutting the budget deficit would also seem impossible unless in case of a US withdrawal from Iraq and Afghanistan not likely to happen either. So the fundamentlas remain negative for the dollar. To a certain extent the asian banks will continue to finance the deficits because they need the US a market but it is only a matter of time before the world realises that it is trading goods for toilet paper and cut their losses. The other way would be a continous depreciation of all world currencies to real assets like gold and silver due to world wide adoption of Bernanke's helicopter theory of money supply. I almost sense the uneasiness among other speculators it is as everybody knows that something terrible is going to happen and a few guys are headed towards the exit and everybody tries to guess how long it is safe to stay. If we brake 80-78 level at the $ index we really go into uncharted teritory. I hope that things will hold together at least until Greenspan's retirement.

Waiting for a crash can take a long time. I hope you are patient.

I spent most of the 90s thinking that the stock market was crazily overvalued. I recall mostly when I worked at the stock exchange in 1995. We were all just shocked at the daily new highs that kept happening. It was another 5 years before the Dow hit 12,000 and actually peaked

I know what you mean I couldnt stand it anymore and liquidated my positions in 1998 somewhat prematurely. I was happy though that I went long on out of the money puts on some tech stocks in 1999 most expired worthless but the few that made profit compensated by far for the losers. I am long on all the grains,cotton,coffeegold,silver, short 30 T-bonds currently buying palladium and homebuilder puts.

In a sense one must look to the Automotive market, since this is what keeps America cooking. Automobile sales for the big three are declining with GM heading the pack. I read in the Daily Autobeat that GM will produce 120K less cars in the next quarter. That is alot of loss revenue for the No. 1 automaker. The trickle down effect is Lansing assembly laying off nearly 3000 people, trickle further to the Tier 1 base like Delphi this number starts to grow. It is these kind of of things that will make people default on debt, worsening the US economic position, and add fear to foreign investors to keep the finance engine going. How much more debt can the American people afford?

I am tightly tied to the Automotive Industry working for a major Tier 1 and 2005 looks horrible on paper and even worse as we tip toe through it. High steel costs and oil costs are taking there toll on suppliers, couple this with reduced auto sales due to less demand, means less revenue being plugged into the economy.

clv101 wrote:It's hard to imagine since I imagine that no one on this board has 1st hand experience of it... Anyone witness the recent Argentina crash? The 1929 crash? Aren't there also lots of safeguards in the stock market these days preventing massive crashes? The vast majority of people can quite happily ignore business and market news - when will that kind of news effect the mad on the street? How will the man on the street be effected by a dollar or market crash?

I was living and working in Edmonton, Alberta at the beginning of the 80's when oil prices crashed.
It was a very weird time, and it happened suddenly. Edmonton, all of Alberta for that matter, simply closed shop, quite literally. I was out of a job without knowing why, I had a new baby, bought some property outside of the city, I had things planned out for a few years. That all disappeared in an instant. I need to repeat, that I didn't really know why this had all happened.

I was in the construction business, building houses. People who had been living the good life where literally, in the middle of winter, taking what they could stuff in a car and driving away from brand new homes. Some didn't even close the door.

On the scale we are discussing here the event then was just a blip. But I can tell you, I've been prepared for anything ever since.

Gravity is not a force, it is a boundary layer.
Everything is coincident.
Love: the state of suspended anticipation.
To get any appreciable distance from the Earth in
a sensible amount of time, you must lie.

RdSnt wrote:I was living and working in Edmonton, Alberta at the beginning of the 80's when oil prices crashed. It was a very weird time, and it happened suddenly. Edmonton, all of Alberta for that matter, simply closed shop, quite literally. I was out of a job without knowing why, I had a new baby, bought some property outside of the city, I had things planned out for a few years. That all disappeared in an instant. I need to repeat, that I didn't really know why this had all happened.

Fascinating to hear this from another place. I was in Great Bend, Kansas in the early 80s. It was a booming town, the hub for oilfield services in the area. We had the combination of the worldwide mini-glut of oil, and regional peak oil production. It was before I was working age, but I was paying attention. My father worked (and still does) as a state unemployment counselor. People left town in the middle of the night. The population of the town went from over 20,000 to 16,000 in two years (and has slowly declined since). There were some excellent deals to be had on luxury items at garage sales. Dozens of restaurants (the majority of the restaurants in town) closed quickly. As did the car dealerships, and the non-chain groceries. And then Wal-Mart came...

I'm always amused at housing prices when I travel. Plenty of starter homes in central Kansas for $20,000.

A little different from Alberta, since oil production wasn't to its peak there. But, I know what a little economic disruption looks like, and it ain't pretty.

Rdsnt, Interesting post. I moved from British Columbia in the mid seventies, escaping double digit unemployment in this province. It was a nightmare. Moved to Calgary, Alberta, lived there for just over 6 years, just in time to see the beginning of the downturn, triggered by Trudeau's national energy program, before I returned to BC, in '82. Have lived and worked through a couple more resource based cylic upswings and downturns.

Canadians, by virtue of living in a resource based economy, are extremely sensitive to flags that the end of a cycle is near. The bear markets and forums are full of Canadian short sellers.

The next one is going to be like nothing we've ever seen. It'll be global. Canada's going to get hit hard. China, with or without US, has not produced a large enough middle class with powers of consumption to offset a decline in exports, so they're going to be effected.

Europe, though, appears to be somewhat insulated, as they are increasingly isolated from American market, not reliant on Americans for their exports. They seem to be a somewhat self-reliant trading block. They'd probably do best to cut Britain adrift, as it will drag them down. There's too much connective tissue between the Anglo-American banking concerns and that wont serve Europe well